So was that a "normal" 900 point drop and rebound ?

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vilanodavis's picture
vilanodavis
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So was that a "normal" 900 point drop and rebound ?

Question to all the sophisticated CM readers out there:

Did you see signs of blatant market manipulation?

Or was all that action in a 30 minute period today just triggers and technical thresholds?

That was really otherworldy to watch...

JAG's picture
JAG
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Re: So was that a "normal" 900 point drop and rebound ?

High Frequency Trading was no doubt responsible.

lundsta's picture
lundsta
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Re: So was that a "normal" 900 point drop and rebound ?

MSN is claiming that there was a glitch in the trading systems.  It would really be interesting to know the entire story.

Farmer Brown's picture
Farmer Brown
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Re: So was that a "normal" 900 point drop and rebound ?

CNBC just said they received a report that a single trader at a major firm who accidentally entered a sell order for a Billion shares instead of for a Million shares, caused the spike down. 

Yeah, right.

 

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lundsta
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Re: So was that a "normal" 900 point drop and rebound ?

Is the market action today a turning point? It seems like we keep talking about a "signal" that will tell us now is when it all will start. Is that signal the debt crisis in greece?

Farmer Brown's picture
Farmer Brown
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Re: So was that a "normal" 900 point drop and rebound ?

CNBC reports:

http://www.cnbc.com/id/36999239

Multiple sources said a trader entered the letter "b"—as in "billion"—when he or she meant to type "m," for "million," shortly before 2:47 p.m. New York time

So we're to believe that Johhny Fat-Thumbs entered the wrong key!  Please!!!

Much more likely that some hedge fund with massive exposure to European bonds or European CDS had to liquidate everything and there were simply not enough bids to cover the ask. 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: So was that a "normal" 900 point drop and rebound ?
Farmer Brown wrote:

CNBC reports:

http://www.cnbc.com/id/36999239

Multiple sources said a trader entered the letter "b"—as in "billion"—when he or she meant to type "m," for "million," shortly before 2:47 p.m. New York time

So we're to believe that Johhny Fat-Thumbs entered the wrong key!  Please!!!

Much more likely that some hedge fund with massive exposure to European bonds or European CDS had to liquidate everything and there were simply not enough bids to cover the ask. 

FB -

As much as I'd like to jump on the conspiracy bandwagon.........Cool

If some hedge fund with exposure had to liquidate, all they had to do was put in a limit order below the bid and the market would have had to take it - then you would have seen a real 1000 point drop.

The short answer to the original question is No.  It wasn't a "normal 900 point drop and rebound".  It was a normal 350 point drop via the scenic route.

A quick look at Level II Time and Sales sheets show that two massively imbalanced trades - one for Proctor and Gamble and one for 3M indeed hit the floor.

The "market" didn't know it was an error however and responded accordingly.  That is to say, progammed sells kept hitting as the market was all over hell's half acre applying further downward pressures.  In the end though, the imbalance never got traded - no one with more than 7 functioning brain cells was buying into a $20-40 spread.  (Which means Geithner certainly tried)

The clueless teleprompter readers on Fox, CNN, ad nauseum keep crowing that "the market was down 1000 points before cutting losses".

While it was certainly exciting to watch, when the dust settles, the market was down ~350 points, not 1000. 

Now, throw a crappy jobs report on it tomorrow and we'll likely see another drop.  It's a good time to have already been in puts.

Farmer Brown's picture
Farmer Brown
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Re: So was that a "normal" 900 point drop and rebound ?

Dogs,

That makes the most sense of anything I've heard so far.  Let us know what else you find, detective.

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Ready
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Re: So was that a "normal" 900 point drop and rebound ?

FB -

Rickets just hung a beauty over in the member area...

http://www.peakprosperity.com/comment/75304#comment-75304

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JAG
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Conspiracy!!!

No way Dogs....this was a warning shot across the bow by the Fed.

As it went over the bow, the shell could be heard to say "Don't audit the Fed or we will crash the market"

(I'm being sarcastic for those who don't know that already)

rickets's picture
rickets
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Re: So was that a "normal" 900 point drop and rebound ?

Thanks Ready.  JAG - did you say something about beer?  haha

There is an old joke that goes something like this (allow me to butcher it):  A couple sees a bear in the woods, and one says "we cant outrun the bear"   The other responds "I only need to outrun you".....or something to that effect.

I have not given this enough thought....but it might be interesting enough to think about that I will toss it out here anyway:  If/when the Euro fails, money will continue to fly into the US.  European countries will have to devalue and for many years if not decades be forced to pay much higher interest.  Their power will decline.  In this process, the US will then find investors for its rolling debt for quite some time. 

The efforts to kick the can way down the road are becoming quite successful regarding funding our debt and keeping our currency strong.  In relative terms, the US is looking at a substantial leap up in wealth and power should the Euro fail. 

Certainly this doesnt fix our issues, nor does it make anyone here feel any richer at home.  But, it does dramatically slow US currency and debt  issues.  Perhaps equity and bond markets crash, and all our standards of living come down, but as this happens perhaps the dollar will not only survive but thrive?

hmmmm

hmmm....not sure...but it interesting. 

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Dogs_In_A_Pile
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Re: So was that a "normal" 900 point drop and rebound ?
Farmer Brown wrote:

Dogs,

That makes the most sense of anything I've heard so far.  Let us know what else you find, detective.

FB -

Good discussion about today starts at post #47.

Here's my last post:

Not sure what to make of it - there were a $hit load of 100 share trades on the THRD and NMS exchanges from 14:30 through after hours.

The low trades on T&S were around $69 and in 100 share blocks.  It started fading from $84 at around 14:30 and started lifting of $70 around 14:46.

If there was a huge trade that came as a limit order below the bid, the market maker doesn't have to show it on T&S - only that a trade occurred at that level.  It lifted from ~$72 around 14:46 back to ~$83 by 14:58 and floated into the close settling around $84.

Here's where it gets interesting - At 16:48:51, the THRD lights up at $73.25 and there are literally pages upon pages of 100 block trades going through - all at $73.25.  There are close to 2000 trades executed in 6 seconds.  Then at 16:48:57 the THRD jumps to $84.24 and about 300 trades go through.  After that, most of the trades originate from the NMS exchange and are the standard Best Bid/Best Ask sell and buy drill - again, all around $83-$84.

Rumors are flying that it was a P&G trade that started the landslide.  Their T&S looks just like 3M, except the low trade came in on the NMS exchange at ~$39 at the same time the THRD was executing at $60 - all right around 14:47:15.  By 14:48:11 it had recovered to ~$60. 

I'd like to know who pocketed the $11 spread on the 3M trades from 16:48:51 to 16:48:57.

It still looks like classic programmed sell/buy response to an external price stressor to me.  In other words, when all is said and done, the market was down 350 today - NOT 1000.

It will be interesting to see if any of these trades get whistled out overnight.   

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saxplayer00o1
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Re: So was that a "normal" 900 point drop and rebound ?

High Frequency Trading was no doubt responsible.

Winner = Jag

"NEW YORK (Reuters) – A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading.

The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent.

But the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," Senator Edward Kaufman said in a statement."

 

Link

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NJrefugee
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Re: So was that a "normal" 900 point drop and rebound ?

I'd be careful about jumping to conclusions.  Senator Kaufman has been pushing for more and more regulation of financial markets, so of course he would be quick to place blame on high-frequency traders, electronic markets, or whatever, despite not having any evidence at all.  Also, since Sen. Kaufman's colleague, Sen. Chuck Schumer, is clearly in the pocket of Duncan Neiderauer, CEO of the NYSE (and ex-Goldman hitter), I'd take anything they have to say about market regulation with a very big grain of salt.  (The NYSE has frequently responded to competitive challenges by rival exchanges and trading venues with calls for regulation, while they have scrambled to get their technology and business model up to date.)  While something clearly went wrong and needs to be fixed, I hope that I am not alone in being somewhat lacking in confidence that the same group of people that defended Fannie and Freddie, then brought us TARP, ObamaCare, and other disasters will have any luck in getting this stuff right.  The only thing I would certainly bet on is that no opportunity to posture or politicize will be missed by the likes of Schumer and Kaufman.  As for the causes of the drop on Thurs, I'll wait to hear what comes of investigations by actual practitioners and market participants, rather than buy into the knee-jerk reactions of politicians with an agenda.

redpill's picture
redpill
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Re: So was that a "normal" 900 point drop and rebound ?

Black Swan author creates one? 

http://online.wsj.com/article/SB10001424052748704879704575236771699461084.html?mod=WSJ_hpp_LEFTWhatsNewsCollection 

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